What is a Status Certificate?
The fall real estate market is in full swing and many Torontonians are spending their days surfing MLS.ca and their weekends visiting open houses, searching for that perfect place that makes their heart flutter. For those of you who are looking at condos, you may have heard something about a Status Certificate and if you are unsure of what it is or why it is important, read on.
Think of buying a condo as like buying shares in a company. You wouldn't want to take ownership in a company without doing your homework first, would you? When you buy a condo, you are becoming a part-owner of a corporation, so you want to make sure the corporation is in good health.
Usually your offer to purchase will be conditional upon your lawyer reviewing the Status Certificate and finding it satisfactory. However, in today's market, you may not have the luxury of including this condition and you and your agent might decide to review it yourselves before submitting an offer. Either way, here are a few key things to look out for:
1) Reserve Fund. The reserve fund represents the account that will be drawn from for ongoing maintenance and repairs of the building. A well-managed condo should have a healthy amount of cash in its reserve fund at all times.
2) Reserve fund study. By law, a reserve fund study must be completed every 3 years. The results of the study will indicate roughly how much your maintenance fees will be increasing in the short-term to cope with the on-going maintenance and upkeep of the building.
3) Common Expenses. The Status Certificate will reveal if the unit you are considering buying is in arrears or if they are up-to-date with their payments.
4) Special Assessments. Check to see if there any upcoming special assessments (e.g. new roof, replace heating system). Has the current owner paid for these or will you be responsible?
5) Legal actions. If there are any outstanding legal actions against the corporation you may be responsible for paying for the judgments or other results of these actions. Buyer beware.
It is always a good idea to have a lawyer review the Status Certificate before your offer to purchase becomes firm and binding, but even if you don't, it's important to know what it is and how it will affect you and the biggest purchase of your life.
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